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UAE Startup Access To Capital 2010-2020 Report Series

Investor Behavior In the UAE Venture Space 2010-2020

Eden Rabbie, September 2020

Page 1

In this report

  1. Investment firms growth and capital contribution to UAE startups
  2. Foreign investment firms
  3. Local investment firms
  4. Collaboration between foreign and local investment firms
  5. Investor growth trends
  6. Number of active investors in UAE startups at its lowest growth since 2014
  7. Investor churn canceled out 46% of all gains over the past 5 years
  8. Only 26 investors sustain the entire venture space in UAE since 2010
  9. 57% of investors invest once and never come back again
  10. Did investors lose interest working with startups in general?
  11. Do UAE investors invest in earlier stages such as seed outside MENA?
  12. Do UAE investors participate in more capital to non-MENA startups?
  13. Final remarks

3. C

Did investors lose interest working with startups in general?

Short answer: No.

Local and foreign investment firms have been significantly active in non-UAE startup rounds.

Figure 3.7 – Where firms with UAE startups on their portfolio also invested around the world in 2015-2019

Comparison: UAE startups funded by firms of the corresponding country vs other GCC startups, MENA startups, non-MENA startups

3. C. 1

Non-UAE startups who are funded by investment firms active in UAE are 2.1 times the number of all funded UAE startups in 2015-2019<sup>76</sup>

  • 53% of investment firms who at any point had invested in UAE startups (±11%) have also funded 286 non-UAE startups (±24) in the past 5 years,<sup>77, 78</sup> 92 were funded in 2019 alone (-16/+19).<sup>79</sup>
  • To compare, there have been 116 funded UAE startups altogether in 2015-2019 (-10/+8).<sup>80</sup>

3. C. 2

The number of non-UAE startups funded by UAE investment firms equals that of all funded UAE startups in 2015-2019<sup>80</sup>

  • 63% of UAE investment firms who at any point had invested in UAE startups (-20%/+23%) have also funded 123 non-UAE startups (-18/+20) in the past 5 years,<sup>81,82</sup> 29 startups in 2019 alone (-9/+12).<sup>83</sup>
  • To compare, there have been 116 funded UAE startups altogether in 2015-2019 (-10/+8).<sup>84</sup>

3. C. 3

More local investment firms prefer non-UAE startups

  • 79% of UAE investment firms who invest in startup rounds have funded non-UAE startups in 2015-2019 (-13%/+10%).<sup>85</sup>
  • This is 1.5 times the number of UAE firms who funded UAE startups in the same period (54% ±13%).<sup>86</sup>
Technical notes (11 notes, 76-86)

<sup>Note 76:</sup> Comparison of non-UAE startups funded by firms active in UAE vs all funded UAE startups in 2015-2019 reported as frequency difference in non-UAE startups funded by 1+ investment firm who had participated in 1+ UAE startup rounds in 2015-2019, vs all UAE startups who raised a startup round in 2015-2019, is positive. δ=170, N<sub>pooled</sub>=731, ⌊95% CI⌋ [144, 196] (statistically significant). ⌊F 95% CI lower bound⌋/⌊F 95% CI upper bound⌋=2.1. For groups details, see Notes 75 and 77.

<sup>Note 77:</sup> Percentage share of investment firms who funded both UAE and non-UAE startups in 2015-2019 reported as population proportion estimator of investment firms who had participated in 1+ UAE startup round in 2010-2019 before participating in 1+ non-UAE startup rounds in 2015-2019, out of total investment firms who participated in 1+ UAE startup rounds in 2010-2019, p=.529. N=282, ⌊95% CI⌋ [60, 89]; N’=140, 95% CI [.43, .64].

<sup>Note 78:</sup> Number of non-UAE startups funded by 1+ investment firm who had participated in 1+ UAE startup rounds in 2015-2019 = 286. N=590, ⌊95% CI⌋ [261, 310]; N’=486, 95% CI [.54, .64]. For comparison with all funded UAE startups, see Note 73.

<sup>Note 79:</sup> Number of non-UAE startups funded by 1+ investment firm who had participated in 1+ UAE startup rounds in 2019 = 92. N=590, ⌊95% CI⌋ [75, 111];N’=133, 95% CI [.57, .84].

<sup>Note 80:</sup> Number of UAE startups who raised a startup round in 2015-2019 = 116. N=141, ⌊95% CI⌋ [105, 124]; 95% CI [.75, .88]. For comparison with non-UAE startups funded by firms active in UAE, see Note 73. For comparison with non-UAE startups funded by UAE firms, see Note 78.

<sup>Note 81:</sup> Comparison of non-UAE startups funded by UAE investment firms active in UAE vs all funded UAE startups in 2015-2019 reported as frequency difference in non-UAE startups funded by 1+ UAE investment firm who had participated in 1+ UAE startup rounds in 2015-2019, vs all UAE startups who raised a startup round in 2015-2019, is not statistically significant. N<sub>pooled</sub>=731, ⌊95% CI⌋ [-13, 30]. For groups details, see Notes 80 and 77.

<sup>Note 82:</sup> Percentage share of UAE investment firms who funded both UAE and non-UAE startups in 2015-2019 reported as population proportion estimator of UAE investment firms who had participated in 1+ UAE startup round in 2010-2019 before participating in 1+ non-UAE startup rounds in 2015-2019 out of total UAE investment firms who participated in 1+ UAE startup rounds in 2010-2019, p=.63. N=71, ⌊95% CI⌋ [16, 32]; N’=38, 95% CI [.43, .86].

<sup>Note 83:</sup> Number of non-UAE startups funded by 1+ UAE investment firm who had participated in 1+ UAE startup rounds in 2015-2019 = 123. N=590, ⌊95% CI⌋ [104, 143]; N’=213, 95% CI [.49, .68]. For comparison with all funded UAE startups, see Note 78.

<sup>Note 84:</sup> Number of non-UAE startups funded by 1+ UAE investment firm who had participated in 1+ UAE startup rounds in 2019 = 29. N=590, ⌊95% CI⌋ [19, 41];N’=43, 95% CI [.46, .97].

<sup>Note 85:</sup> Percentage share of UAE investment firms who funded non-UAE startups in 2015-2019 reported as population proportion estimator of UAE investment firms who had participated in 1+ non-UAE startup rounds in 2015-2019 out of total UAE investment firms who participated in 1+ startup rounds in 2015-2019, p=.79. N=71, ⌊95% CI⌋ [44, 59]; N’=67, 95% CI [.66, .89].

<sup>Note 86:</sup> Comparison of UAE investment firms who funded non-UAE startups in 2015-2019 vs those who funded UAE startups, reported as frequency difference in UAE investment firms who had participated in 1+ non-UAE startup rounds vs UAE investment firms who had participated in 1+ UAE startup rounds, in 2015-2019, is positive. δ=17, N=71, ⌊95% CI⌋ [5, 27] (statistically significant); Wilson p’ 95% CI [.07, .39](statistically significant).


Measurement is on year of round announcement.

Statistical significance and effect size are studied through analysis of confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

N is sample size of investment firms or startups active in the entire group sample. Refer to the notes for context.

Contact me if you need help or more details.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. Startup Report MENA [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. Statistics in medicine, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale interaction for proportions. Statistics in medicine, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. Journal of Quantitative Linguistics, 20:3, 178-208. doi:10.1080/09296174.2013.799918

3. D – Frequency

Do UAE investors invest in earlier stages such as seed outside MENA?

Short answer: Yes, significantly actively.


Figure 3.8 – Count and disclosed funding size of startup rounds raised with UAE investment firms with local and foreign startups 2015-2019

with seed rounds highlighted

Comparison: Seed rounds raised by UAE and non-MENA startups

3. D. 1

UAE firms invest in more seed rounds outside MENA, compared to inside UAE

  • Non-MENA seed rounds in 2015-2019 account for 62% (±9%) of UAE firms’ entire seed investment activity,<sup>87</sup> 53% when excluding India and Pakistan seed rounds (-8%/+9%).<sup>88</sup>
  • This is significantly higher than their UAE seed rounds in the same period (31% -8%/+9%).<sup>89,90</sup>

3. D. 2

Non-MENA seed rounds by UAE firms equal all UAE startup rounds combined

  • The number of non-MENA seed rounds alone in which UAE investors participated in 2015-2019 is at the same level of the entire number of UAE startup rounds in the same period (122 vs 99 -16/+17).<sup>91</sup>
  • This holds even when limited to 2019 alone (23 vs 23 -7/+11).<sup>82</sup>
  • And still holds when excluding India and Pakistan startup rounds (104 vs 99 -16/+17).<sup>93</sup>
Technical notes (7 notes, 87-93)

<sup>Note 87:</sup> Percentage share of UAE investment firms non-MENA seed rounds in 2015-2019 reported as population proportion estimator of frequency of seed rounds raised by non-MENA startups with participation from 1+ UAE investment firms, out of all seed rounds raised with UAE investment firms, in 2015-2019, p=.62. N=342, ⌊95% CI⌋ [104, 140]; N’=196, 95% CI [.53, .72].

<sup>Note 88:</sup> Percentage share of UAE investment firms non-MENA seed rounds in 2015-2019, excluding India and Pakistan, reported as population proportion estimator of frequency of seed rounds raised by non-MENA startups, excluding India and Pakistan, with participation from 1+ UAE investment firms, out of all seed rounds raised with UAE investment firms, in 2015-2019, p=.53. N=342, ⌊95% CI⌋ [87, 121]; N’=196, 95% CI [.45, .62].

<sup>Note 89:</sup> Difference between UAE investment firms non-MENA seed rounds and UAE seed rounds in 2015-2019 reported as frequency difference and population proportion estimator difference in startup rounds with participation from 1+ UAE investment firms raised by non-UAE startups vs raised by UAE startup rounds, in 2015-2019, is positive. δ=61, N=342, ⌊95% CI⌋ [37, 83] (statistically significant); Wilson p’ 95% CL [.11, .24] (statistically significant). Frequency of seed rounds in 2015-2019 for non-MENA and UAE, respectively, o=(122, 61). N=342, ⌊95% CI⌋ ([104, 140], [47, 76]); Wilson p’ 95% ([.31, .41], [.14, .22]).

<sup>Note 90:</sup> Difference between UAE investment firms non-MENA seed rounds except India and Pakistan, and UAE seed rounds, in 2015-2019, reported as frequency difference and population proportion estimator difference in startup rounds with participation from 1+ UAE investment firms raised by non-UAE startups excluding India and Pakistan vs raised by UAE startup rounds, in 2015-2019, is positive. δ=43, N=342, ⌊95% CI⌋ [20, 65] (statistically significant); Wilson p’ 95% CL [.06, .19] (statistically significant). Frequency of seed rounds in 2015-2019 for non-MENA excluding India and Pakistan, and UAE, respectively, o=(104, 61). N=342, ⌊95% CI⌋ ([87, 121], [47, 76]); Wilson p’ 95% ([.26, .36], [.14, .22]).

<sup>Note 91:</sup> Difference between UAE investment firms non-MENA seed rounds and all UAE startup rounds in 2015-2019 reported as frequency difference in non-MENA startup rounds with participation from UAE investment firms vs all UAE startup rounds, in 2015-2019, is not statistically significant. N=342, ⌊95% CI⌋ [-1, 47]; Wilson p’ 95% CL [-.01, .14]. Frequency of non-MENA seed rounds and all UAE startup rounds in 2015-2019, respectively, o=(122, 99). N=342, ⌊95% CI⌋ ([104, 140], [83, 116]); Wilson p’ 95% ([.31, .41], [.26, .36]).

<sup>Note 92:</sup> Difference between UAE investment firms non-MENA seed rounds and all UAE startup rounds in 2019 reported as frequency difference in non-MENA startup rounds with participation from UAE investment firms vs all UAE startup rounds, in 2019, is not statistically significant. N=342, ⌊95% CI⌋ [-13, 13]; Wilson p’ 95% CL [-.04, .04]. Frequency of non-MENA seed rounds and all UAE startup rounds in 2019, respectively, o=(23, 23). N=342, ⌊95% CI⌋ ([15, 34], [15, 34]); Wilson p’ 95% ([.04, .10], [.04, .10]).

<sup>Note 93:</sup> Difference between UAE investment firms non-MENA seed rounds except India and Pakistan, and all UAE startup rounds, in 2015-2019, reported as frequency difference in non-MENA startup rounds excluding India and Pakistan, with participation from UAE investment firms, vs all UAE startup rounds, in 2015-2019, is not statistically significant. N=342, ⌊95% CI⌋ [-19, 29]; Wilson p’ 95% CL [-.06, .08]. Frequency of non-MENA seed rounds excluding India and Pakistan, and all UAE startup rounds, in 2015-2019, respectively, o=(104, 99). N=342, ⌊95% CI⌋ ([87, 121], [83, 116]); Wilson p’ 95% ([.26, .36], [.24, .34]).


Measurement is on year of round announcement.

Statistical significance and effect size are studied through analysis of confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

N is sample size of investment firms or startups active in the entire group sample. Refer to the notes for context.

Contact me if you need help or more details.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. Startup Report MENA [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. Statistics in medicine, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale interaction for proportions. Statistics in medicine, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. Journal of Quantitative Linguistics, 20:3, 178-208. doi:10.1080/09296174.2013.799918

3. E – Capital per round per stage

Do UAE investors participate in more capital to non-MENA startups?

Figure 3.9 – Median of startup rounds raised with UAE investment firms by stage in UAE and non-MENA startups 2010-2019

Startup rounds count and median

Comparison: UAE investment firms funded UAE startup rounds, non-MENA startup rounds

  • Short answer: Yes, except at seed stage.
  • Seed is similar in UAE and non-MENA: When it comes to capital per seed rounds in which UAE investment firms participate, the median capital per seed round and raised by non-MENA startups is on the same level as that raised by UAE startups (Med<sub>pooled</sub> = $1M).<sup>94</sup>
  • Non-MENA series A is twice as large, series B is 3.5 times as large: At series A and B stages funding with participation from UAE investment firms, the median capital per round raised by non-MENA startups is significantly higher than UAE startup rounds (Series A $6.45M vs $3M, Series B: $35M vs $10M).<sup>95, 96</sup>
  • UAE investment firms participated in non-MENA startup rounds totaling $2.4 billion in 2015-2019, significantly higher than UAE startup rounds in the same period ($241 million).<sup>97‡</sup>
Technical notes (4 notes, 94-97)

<sup>Note 94:</sup> Capital change at seed stage for UAE vs non-MENA startups when funded by UAE investment firms in 2015-2019 reported as difference of median capital per seed round raised by UAE vs non-MENA startups, with participation from UAE investment firms, in 2015-2019, is not statistically significant. UAE(Mdn=$775k), Non-MENA(MDN=$1100K); Mann–Whitney U(N=135)=1663.5, Med<sub>pooled</sub>=1000k, z=-1.589, p=.056, p<sub>2T</sub>=.11.

<sup>Note 95:</sup> Capital change at series A stage for UAE vs non-MENA startups when funded by UAE investment firms in 2015-2019 reported as difference of median capital per series A round raised by UAE vs non-MENA startups, with participation from UAE investment firms, in 2015-2019, is positive. UAE(Mdn=$3M), non-MENA(Mdn=$6.45M); Mann–Whitney U(N=44)=115, z=-2.946, p=.0016 (statistically significant), p<sub>2T</sub>=.003 (statistically significant).

<sup>Note 96:</sup> Capital change at series B stage for UAE vs non-MENA startups when funded by UAE investment firms in 2015-2019 reported as difference of median capital per series B round raised by UAE vs non-MENA startups, with participation from UAE investment firms, in 2015-2019, is positive. UAE(Mdn=$10M), non-MENA(Mdn=$35M); Mann–Whitney U(N=35)=48.5, z=-2.041, p=.021 (statistically significant), p<sub>2T</sub>=.041 (statistically significant).

<sup>Note 97:</sup> Capital difference in startup rounds reported as difference in population percentage estimator of startup rounds in which UAE investment firms funded a startup, for non-MENA vs UAE startups, in 2015-2019, is positive. δ=.78, N=256, CI 95% [.697, .863] (statistically significant); ⌊95% CI⌋ [$1973M, $2444M]. Total capital in startup rounds capital for non-MENA and UAE, respectively, o=(161, 73). N=256, ⌊95% CI⌋ ([$2278M, $2622M], [$80M, $402M]).


Measurement is on year of round announcement.

Statistical significance is studied through analysis of p-value or confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

N is disclosed rounds only in the entire group sample. Refer to notes for context.

‡ Participation in a round does not equal contribution. Due to the nature of data it is not feasible to calculate the actual share of each contributor.

‡ Given the difficulty of attribution due to lack of granular data, we recommend using the insights marked with the double dagger sign (‡) on total capital contribution by investment origin only to gain a sense of direction and relation from the data.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. Startup Report MENA [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Hettmansperger, T. and McKean, J. (2011). Robust Nonparametric Statistical Methods. Boca Raton: CRC Press. doi:10.1201/b10451

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. Statistics in medicine, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale interaction for proportions. Statistics in medicine, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. Journal of Quantitative Linguistics, 20:3, 178-208. doi:10.1080/09296174.2013.799918

Investor Behavior In UAE Venture Space 2010-2020 – Final Remarks

The UAE venture space has an opportunity to grow to 153%, but high investor turnover denies it

UAE does not have a problem attracting new investment firms to local startup rounds. It has a problem with keeping them.


The number of foreign investment firms joining the space has tripled since 2015, with 86% of funded UAE startups attracting foreign capital, while capital deployed in rounds with foreign firms doubling in 2015-2019. In fact, 4 of every 5 investment firms active with UAE startups are foreign firms.


Local firms’ contribution has grown massively. Participating in funding 60% of all funded UAE startups is not a small feat. However, this share has not changed since 2014, despite UAE firms doubling their capital contribution to rounds. At the same time, UAE firms invest heavily abroad. The ratio of local to foreign startups with UAE capital is 1:2.


However, while the UAE venture space gains the most on the foreign capital front, it is also where it bleeds the most. 66% of foreign investment firms try UAE startups once and leave, without ever coming back. With investor churn at record high, today we are left with only 23 firms (out of 150) invest consistently in UAE rounds for 3+ years, split evenly between local and foreign firms.


If the UAE venture spaces continues to attract more firms without addressing the high investor turnover problem it will only mean more one-off firms. On the other hand, improving investor retention to get firms to be active for a second year, cutting the 57% one-off rate, would boost the growth of the consistent core base to 153% in five years, adding 35 consistent firms instead of 23, on top of the current base. This effectively turns around the UAE startup access to capital slowdown.


Solving the investor turnover challenge is key. Knowing what makes investors leave is the first step to solving the challenge. In the next report, we explore the startup side in the UAE venture space to find out if there is something there that resulted in investors behaving this way, and if so, how to improve it.

About the Editor

Eden Rabbie
Eden Rabbie on LinkedIn

Eden Rabbie

Data Analytics and Commercialization in MENA

– 12 years of experience working with governments developing their SME sectors.

– Data science background, CIM, Six Sigma. Japanese-trained.

– Featured author on Medium.

Worked 8 years with the Japanese government to help MENA governments develop their SME sectors, followed by 3 years with UAE government to grow its venture space.

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Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. Startup Report MENA [Online]. https://startupreport.me/uae-startup-access-to-capital-2020

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